Company formation in Hungary. Tax resume and benefits for non-residents share holders.

 

How to Register a Company in Hungary in 2025: A Guide for Non-Residents

Hungary, with its strategic location in Central Europe, business-friendly environment, and one of the lowest corporate tax rates in the EU at 9%, is an attractive destination for entrepreneurs looking to establish a company. For non-residents, registering a company in Hungary is a straightforward process that can be completed remotely, offering access to the European Union market and opportunities for residency. This article provides a step-by-step guide on how to register a company in Hungary and explains the tax implications for non-residents.

Why Choose Hungary for Company Registration?

Hungary offers several advantages for foreign entrepreneurs:

• Low Corporate Tax: A flat 9% corporate tax rate, the lowest in the EU.
• Strategic Location: Central Europe provides access to major markets like Austria and Germany.
• Flexible Business Structures: Options like Limited Liability Companies (Kft) and Private Joint Stock Companies (Zrt) cater to various business needs.
• Residency Opportunities: Non-residents can apply for a residence permit through business ownership.
• Double Tax Treaties: Hungary has agreements with over 80 countries, reducing tax liabilities for non-residents.

Steps to Register a Company in Hungary

1. Choose a Business Structure

Selecting the appropriate business entity is crucial, as it impacts tax obligations, liability, and operational flexibility. The most common options for non-residents include:

• Limited Liability Company (Kft): Ideal for small to medium-sized businesses, requiring a minimum share capital of HUF 3 million (~€7,500). Owners’ liability is limited to their capital contribution.
• Private Joint Stock Company (Zrt): Suitable for larger businesses, with a minimum share capital of HUF 5 million (~€12,500).
• Branch Office: An option for foreign companies to operate in Hungary without forming a separate entity.
• Sole Proprietorship (e.v.): Best for freelancers or small-scale service providers, but non-residents need a Hungarian residency permit to register as a sole trader.

For most non-residents, a Kft is the preferred choice due to its flexibility and limited liability.

2. Select a Company Name

Choose a unique company name that complies with Hungarian regulations. The name must not conflict with existing companies and should include the business type (e.g., “Kft” or “Zrt”). You can check name availability through the Hungarian Company Register (www.companyregister.hu)

3. Prepare Required Documents

To register a company, you’ll need:

• Valid identification (passport or EU driver’s license) for all owners and managers.
• Personal tax ID number (if available; a Hungarian tax number will be issued during registration).
• Articles of Association or Founders’ Resolution, outlining the company’s structure and operations.
• Specimen signature of the managing director.
• Proof of registered office address in Hungary (a virtual office is acceptable).

Documents may require certified Hungarian translations, so working with a local attorney or consultant is recommended.

4. Appoint a Local Attorney or Consultant

Non-residents can register a company remotely through an authorized Hungarian lawyer or business consultant. The attorney will handle document submission and communication with the Hungarian Court of Registration. Documents can be signed via video conference, with originals sent by mail.

5. Register with the Hungarian Court of Registration

Submit the required documents to the Court of Registration, either online via the Hungarian e-government portal (www.magyarorszag.hu) or in person through your attorney. The registration process typically takes 2–15 days, depending on whether you use template documents (1 hour for simplified registration) or customized ones (up to 15 days). Upon approval, you’ll receive a Certificate of Incorporation, a company registration number, and a Hungarian tax number.

6. Obtain a Tax Number and VAT Registration

After registration, the company is automatically assigned a Hungarian tax number by the National Tax and Customs Administration (NAV) through the Court of Registration’s “one-stop shop” system. If your annual revenue exceeds HUF 12 million (~€32,000), VAT registration is mandatory, with a standard rate of 27% (preferential rates of 18% or 5% apply to certain goods and services). Non-residents can also register for VAT voluntarily if engaging in taxable activities.

7. Open a Corporate Bank Account

A Hungarian Forint (HUF) bank account is mandatory for financial transactions, tax payments, and operations. Non-residents must open the account in person, as remote opening is not permitted. Required documents include the Certificate of Incorporation, Articles of Association, and identification of the managing director.

8. Register with Additional Authorities

Complete mandatory registrations with:

• Local Tax Office: For local business tax (0–2% based on municipality).
• Chamber of Commerce: A one-time registration fee applies.
• Statistical Office (KSH): For statistical reporting.
• Social Security Authorities: If hiring employees, register for social security contributions (13% of gross employee income).

These registrations are typically handled by your attorney or accountant within 15 days of company formation.

9. Engage an Accountant

Hungarian tax laws require accurate accounting and compliance. Engaging a local accountant is highly recommended to manage tax filings, VAT returns, and annual reports.

Tax Implications for Non-Residents

Non-residents operating a Hungarian company face specific tax obligations. Below is a summary of the key taxes and considerations:

Corporate Tax

• Rate: 9%, the lowest in the EU, applied to worldwide income for Hungarian-registered companies.
• Non-Resident Shareholders: Dividends paid to non-resident corporate shareholders are exempt from withholding tax. Dividends to non-resident individuals are subject to a 15% withholding tax, which may be reduced or eliminated under double tax treaties.

Value Added Tax (VAT)

• Standard Rate: 27%, with reduced rates of 18% or 5% for specific goods and services.
• Registration Threshold: Mandatory if annual revenue exceeds HUF 12 million (~€32,000). Non-residents can register voluntarily for intra-EU transactions.
• Filing: Quarterly during the first year, then annually or quarterly based on revenue.

Local Business Tax

• Rate: 0–2%, depending on the municipality (e.g., Budapest has no local business tax). It is calculated on net sales revenue, with deductions for costs like materials and R&D.

Personal Income Tax for Non-Residents

• Non-residents are taxed only on Hungarian-sourced income at a flat rate of 15%. If you spend at least 183 days per year in Hungary, you may be considered a tax resident, subject to worldwide income taxation.
• Double Tax Treaties: Hungary’s treaties with over 80 countries (e.g., UK, US, UAE) prevent double taxation on income earned by non-residents. Check the specific treaty for your country.

Simplified Tax Regimes

• KIVA (Small Business Tax): A simplified tax option for small and medium-sized businesses, replacing corporate tax and social contributions with a single tax rate (10–11% depending on revenue). Suitable for companies with low profits and high labor costs.
• KATA (Small Taxpayers’ Tax): Primarily for sole proprietors, not applicable to non-residents without a residency permit.

Other Considerations

• Withholding Tax: No withholding tax on royalties or interest paid to non-residents. A 15% withholding tax may apply to dividends paid to non-resident individuals, subject to treaty reductions.
• Transfer Pricing: Transactions with related parties must be at arm’s length, with documentation required to avoid penalties.
• Loss Carryforward: Losses can be carried forward for 5 years to offset up to 50% of taxable profits.

Residency Permit for Non-Residents

Non-residents who register a company in Hungary can apply for a residence permit for guest self-employment. Requirements include:

• A minimum share capital of ~€7,700 for a Kft or higher for a Zrt.
• A business plan demonstrating sufficient income to support the applicant.
• No specific activity or investment requirements beyond company operation.

The permit is valid for one year, renewable for two more years if the company remains operational and the applicant spends at least 90 days in Hungary every six months. Family members can apply for residency after the first year.

Costs of Company Registration

• Court of Registration Fees: HUF 50,000–100,000 (~€130–260) for a Kft, higher for a Zrt.
• Legal and Translation Fees: HUF 40,000–60,000 (~€100–150) for document preparation.
• Share Capital: HUF 3 million (~€7,500) for a Kft, which can be used for business operations without being kept as a deposit.
• Accountant Fees: Vary based on services, typically €100–300/month.
• Chamber of Commerce Fee: A one-time fee, included in some registration packages.

Challenges for Non-Residents

• Language Barrier: Documents must be in Hungarian, requiring professional translation.
• Bank Account Opening: Strict bank procedures may complicate account setup for non-residents.
• Compliance: Ongoing tax and reporting obligations require diligent management, best handled by a local accountant.

Tips for Success

• Hire a Local Expert: Engage a Hungarian lawyer or consultant to navigate legal and tax requirements.
• Understand Tax Treaties: Check if your home country has a double tax treaty with Hungary to minimize tax liabilities.
• Plan for Residency: If seeking a residence permit, ensure your business plan meets immigration requirements.
• Use Digital Tools: Register for the Client Gateway (www.magyarorszag.hu) for electronic administration and tax filings.

Conclusion

Registering a company in Hungary as a non-resident is an efficient process that opens doors to the EU market and offers significant tax advantages. With a low 9% corporate tax rate, flexible business structures, and residency opportunities, Hungary is a compelling choice for entrepreneurs. By following the steps outlined above and engaging local professionals, non-residents can establish a compliant and successful business in Hungary. For personalized assistance, consult a Hungarian lawyer or business service provider like Helpers Hungary (helpers.hu) or Gurcan Partners (gurcanpartners.com).